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Investor Accuses Jeff Sutton of Fraud Over Times Square Deal

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Jeff Sutton (Google Maps) of 1552-1560 Broadway and Wharton Properties

Updated at 12:30 pm on May 18, 2022: With a 10-year-old deal to build a large retail space in the heart of Times Square, Jeff Sutton has brought both a lucrative addition to the portfolio and a new enemy. The founder of the Wharton Property of Billionaire is an investor who claims to have deceived him from millions.

Investor Norman Rapaport claims that Sutton defaulted on the $ 15 million loan Rapaport provided to him to purchase the landmark I. Mirror Building in 2011. 1552 Broadway He claims that Sutton used a shell company to deceive him from the agreed profit sharing. Complaints A show submitted to the New York Supreme Court last week.

The proceedings blame Sutton, Wharton Properties, and 1552 Broadway JS Mez LLC, alleged “dummy companies” for fraud, unjust enrichment, and promissory note violations.

Following the publication of this story, Wharton Property issued the following statement:

“Mr. Rappaport’s recent claims about Jeff Sutton are completely unfounded. Rappaport is Jeff Sutton’s long-standing and successful investor. As he is familiar with, the newly formed entity (asset by definition). The creation and use of corporate debt (without) is part of virtually all real estate transactions and by no means constitutes “fraud.” Also, even if Mr. Sutton had the opportunity to conduct a swift and binding arbitration to resolve this issue quickly, his current action to simply initiate this public action to embarrass Mr. Sutton. The tactics are disappointing. Mr. Sutton is a very successful investor, highly regarded and has over 30 years of successful trading with many investors. He intends to vigorously and successfully defend against this futile attack. “

The controversy stems from a 2011 transaction in which Sutton partnered with SL Green Realty to acquire a 15,000-square-foot Midtown property for $ 137 million. A few weeks after the deal, Sutton and SL Green acquired a ground lease on the adjacent 1560 Broadway and knocked down the wall to join the space. (SL Green is not a defendant in the Lapaport proceedings.)

Within a few months, clothing retailer Express signed a 15-year lease to occupy the resulting 30,000 square feet of space when retail rents were rising across the city, especially Times Square. Did.

Rappaport needs Sutton and SL Green, described in the proceedings as Sutton’s “longtime friends,” to close the deal after securing a $ 125 million mortgage on 1552 Broadway in 2011 He claims to have approached him in search of the remaining funds.

Rappaport claims to have financed Sutton $ 15 million in August 2011, hoping that it will be repaid by September 2016. Benefits from combined properties. According to Rappaport, Sutton personally agreed to guarantee the loan.

Rappaport argues that problems with that arrangement arose immediately.

Sutton allegedly refused to document the transaction in a promissory note and instead sought to renegotiate a more favorable arrangement. After Rapaport refuses, he claims that Sutton executed the promissory note in January 2013 — more than a year after the $ 15 million loan was issued.

This turned out to be a ploy, according to Rapaport, who claims that Sutton refused to sign the memo, either personally or as a member of the Wharton Property. Instead, Sutton signed the memo on behalf of 1552 Broadway JS Mez LLC. This is what Sutton misrepresented as a partial owner of the property, Rapaport claims.

Rappaport claims to have accepted the note because Sutton had already paid interest for over a year. The memo allegedly poured in all financial obligations to real estate through LLC, which had no shares in the building or assets to repay to Rappaport.

The Lapaport proceedings call Sutton’s promissory note a “chabble” and are part of a plan to lend money to Lapaport at a low interest rate and deceive him from both his $ 15 million loan and his share of property profits. ..

Sutton defaulted on promissory notes in August 2016, according to Rapaport, who claims that Sutton did not claim immediate repayment as Sutton continued to pay interest monthly.

In December 2020, Sutton allegedly notified Rapaport that he would not pay interest because of the economic impact of the pandemic. However, according to an annual report released by listed REIT SL Green, the joint venture lease on Broadway 1552-1560 was nearly last year, according to a lawsuit alleging that Sutton used the money to pay instead. Generated $ 30 million in revenue. Rappaport for investing and acquiring other properties.

Rappaport is suing for a 10% stake in profits, $ 15 million loan repayments since the end of 2020, and monthly interest payments.

This story has been updated with a statement from Wharton Properties.

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